3rd Quarter Directors Commentary – Auckland market still ‘hot’
Auckland’s residential property market continues to be buoyant and remains the strongest housing market in the country. Demand is strong from both home buyers and investors, however this is met by a shortage of listings, resulting in a lot of demand being left unmet.
Key housing indicators continue to improve. August 2013 sales volumes have increased 12.6% across the Auckland region, up on volumes during the same period last year. This reflects Auckland’s significantly tighter demand-supply balance to the rest of the country. The trend of median days to sell a property in this current market remains stable at 29. This is a considerable improvement on Auckland’s 10 year average for August of 33 days.
The trends in sales volumes are showing a ‘slow down’ in volume growth over the last few months. However the trend in median days to sell has shown improvement. Overall, the trends still reflect that the housing supply level in the Auckland market is gaining little traction in responding to the demand pressures.
Other factors influencing the housing market include:
- The Reserve Bank made little change to its interest rate forecasts in its September monetary policy statement and expects the OCR to remain unchanged at 2.5% for the remainder of this year. Interest rates have risen globally in recent months and we are now seeing rises in retail fixed rates from most banks. House price inflation still persists in Auckland. Restrictions on high loan-to-value residential mortgage lending come in to effect in October, which for some buyers will mean a higher deposit, and the RBNZ expects this to help slow the national housing market.
- Auckland home loan affordability is at its worst since March 2010. House price inflation is high and growing at a much faster rate than incomes. First home buyers are scrambling to get low deposit loans ahead of the anticipated clampdown by banks come October 1. According to the Roost Home loan affordability index it currently takes at least 85% of a single median after tax income to afford a 1st quartile priced house in Auckland.
- Net migration is starting to produce more consistent gains. New Zealand’s annual gain in the July 2013 year was 10,600 migrants, the highest gain since the November 2010 year. Auckland receives a large % of the country’s net migration. Australia has been at the top of the list for departing kiwis seeking better wages, however this is now slowing due to a more favourable economic outlook for New Zealand, particularly as the pending construction boom looks set to boost activity.
- The volume of residential building activity for New Zealand, surprisingly fell in the 2nd quarter to June. This fall follows a strong 11% increase in the March quarter. Building work put in place lags substantially behind building consents lodged. However, on the upside, consents themselves have increased, which indicates that there is a large volume of building work in the pipeline for the next few years.
- Housing price expectations remain high according to the ASB NZ Housing Confidence Survey for the July 2013 quarter. 56% of the respondents expect house prices to rise over the next 12 months, a marginal drop from the previous quarter. In Auckland the low levels of listings and strong buyer competition is being met with an increasing number of respondents who believe it is no longer a good time to buy. Interest rate expectations have nudged higher with more respondents expecting interest rates to increase in the next 12 months, with most respondents believing the OCR will lift from early 2014.
Published on Monday, September 23rd, 2013, under Directors Market Commentary